BAXTER -- The developer of a proposed three-story office building is seeking tax abatement from the city of Baxter.
The Baxter City Council Tuesday gave conceptual approval for a five-year tax abatement to Arnold Johnson Inc. Arnold Johnson is the former United Pensions Inc. owner. Part of the city council's approval was that the proceeds of the tax abatement will go toward public improvements in the city's right-of-way.
Over five years the abated taxes will amount to an estimated $30,000 per year, or $150,000 over the life of the abatement.
The council accepted a $5,000 fee from Johnson for development of the abatement plan and to facilitate the abatement process. The council also sought to create an abatement policy and guidelines.
The 42,000 square-foot office building would be located on Golf Course Road behind the Floor to Ceiling Store. It would be a multi-tenant office building.
David Lauer, representing Johnson, told the council that Johnson was constructing the office building to promote professional service businesses in the area. Abatement was being sought by Johnson to lower rental rates for tenants.
"We want to take away the incremental penalty potential tenants would have to pay with higher property taxes," said Lauer.
Johnson requested the tax abatement be for 10 years, but council member Darrel Olson disagreed, noting tax-increment financing projects in the Industrial Park have had five-year districts, and a guarantee in regard to jobs and wages.
"This (Baxter) is the place to be, and some of this stuff is going to come whether we help it or not," said Olson.
Abatement regulations were designed about three years ago to give each taxing jurisdictions -- schools, counties and cities -- a voice in economic and redevelopment efforts. With abatement, the taxing district participating has more flexibility and the other districts have the ability to decide if they want to participate.
Tax abatement is similar to TIF in that the increase in tax of the property can be returned to the developer for a set period of time to help pay off the cost of the development. Unlike TIF, the existing base tax of the property could be returned to the developer through a tax abatement. In this case, the city council is only returning the increment and not the base tax to the developer.
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